Edited from: “DuPont 10k annual report 2008 and 2009 annual review”
DuPont states that it had anticipated “economic headwinds” in 2008, but the year evolved in “unexpected ways” for the company. The company says that it remains confident in its businesses, its cash-generating ability, and its prudent financial discipline. On this basis, in 2009 it will focus on areas that it can control, such as staying close to customers and dramatically reducing costs, all directed towards driving for cash. 
The company states that it has clear priorities for 2009, which it had entered with a strong balance sheet, excellent liquidity, and a favourable cost of borrowing. “We intend to emerge from the global recession stronger, faster, and more agile than our competitors”, says chief executive officer, Ellen Kullman.
Key priorities in 2009
Maximise variable contribution dollars
DuPont says that revenue-driven earnings are the key source of cash, and it has become “something of a mantra” at DuPont that it will fight for every customer order, while ensuring that it gets paid for the value it delivers with its science-based products, including the 901 new products it introduced in 2008.
Dramatically reduce spending
It plans to deliver $1.1bn in cost reductions in 2009. Its restructuring programme is on track to deliver at least a $130m benefit in 2009. The company further has momentum in its productivity efforts with goals to deliver $600m in fixed cost projects.
It is also implementing a wide range of projects aimed at $400m in variable cost reductions. Its goal is to generate more free cash flow in 2009 than in 2008.
Zero-base all capital expenditures
Capital spending in 2009 will be reduced by about 20% versus 2008. It will continue to assess each project to determine whether further cuts are warranted, using a “zero-based” approach and raising the bar on project justification.
Aggressively reduce working capital
More than 200 new projects aimed at reducing working capital were staffed and launched early in 2009. The DuPont production system (DPS), an operational process designed to strengthen its production capability, was operating at 18 sites by the end of 2008. It is expected that the DPS will be in place at 300 sites by 2011. This will contribute to a reduction of $1bn in working capital in 2009.
Meanwhile, the company states that it is continuing with its basic strategies for growth, particularly in areas that offer opportunity even in the current downturn. In agriculture & nutrition, market fundamentals remain strong. While some currency headwind is expected in 2009, it will see continued growth for this segment. Strong demand also continues for its photovoltaic products and Nomex aramid fibres.
DuPont will also continue to invest in its R&D pipeline, particularly in its high growth, high margin opportunities.
“When we come out of the current recession, we believe the world is going to look very different than it did before. Demand for natural resources is increasing, while availability is decreasing. Longer term, continued growth in demand for consumer durables, coupled with infrastructure needs in large, formerly constrained economies, will have an impact on both natural resources and food. At DuPont, we call this the new reality”, says Kullman.
The underlying factors creating the new reality are:
(1) population growth;
(2) demand for food;
(3) climate change; and
(4) energy use.
To deal successfully with these challenges DuPont will require innovation in technologies across many industries. As a market-driven science company, it has factored these trends into the market-back approach it takes in its research and innovation. The current global crisis is reshaping many opportunities, but it expects these fundamental needs to persist.
“While we devote maximum effort to dealing with the economic downturn, we also are making real changes that will enable us to take full advantage of a changed global economy when the upturn comes”, says Kullman.
Outlook
For the year 2009, the company’s earnings outlook is a range of $2.00 to $2.50/share, anticipating that the global economic recession will adversely affect the company’s results.
Favourable global agriculture market and competitive conditions are expected to support continued sales and earnings growth for the agriculture & nutrition segment.
However, lower demand for the company’s major polymer, chemical, material and electronic product lines, and the impact of currency are expected to limit the company’s overall revenue growth.
The company plans to continue its appropriate level of support for businesses expected to have above-average growth rates and margins. In addition, cash-generating actions have been implemented including spending reductions and restructuring to better align capital expenditures and costs with anticipated continuing lower global demand.
For 2009, the company has set targets for capital expenditures of about $1.6bn, and fixed cost and working capital reductions of about $730m and $1bn respectively.
Please see and DuPont sees market stabilisation and early signs of recovery and INSIGHT: DuPont innovating a way out of the crisis and INSIGHT: DuPont sharpens up for growth or go to ICIS news.
ICIS Chemical Business magazine has unveiled the ICIS Top 100 Chemical Companies, with rankings based on 2008 sales.
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See the article and analysis of the ICIS Top 100 on ICIS news.
Financial highlights: DuPont, year ended 31 December
|
|
2008 |
2007 |
2006 |
2005 |
2004 |
|
Sales ($ m) |
30,529 |
29,378 |
27,421 |
26,639 |
27,340 |
|
R&D ($ m) |
1,393 |
1,338 |
1,302 |
1,336 |
1,333 |
|
Net Profit ($ m) |
2,007 |
2,988 |
3,148 |
2,056 |
1,780 |
|
Total Assets ($ m) |
36,209 |
34,131 |
31,777 |
33,291 |
35,632 |
|
Diluted earnings per share ($) |
2.20 |
3.22 |
3.38 |
2.07 |
1.77 |
|
Number of Employees |
60,000 |
60,000 |
59,000 |
60,000 |
60,000 |
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DuPont
Company Structure
DuPont sees itself as a company delivering science-based solutions. Its science and technology expertise ranges from high-performance materials through to agricultural products in areas such as food and nutrition, health care, apparel, safety and security, construction, electronics and transportation. DuPont was founded in 1802 primarily as an explosives company. Its focus then turned to chemicals, materials and energy.
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